Another big day for the Chancellor of the Exchequer, Rachel Reeves today delivered the outcome of her Spending Review, laying out the government’s spending plans for the next few years.

The review has been months in the making with ministers, special advisers and officials from across Government, negotiating with their Treasury counterparts against a backdrop of private and public political manoeuvring and strong-arming. Departments want as much money as they can, to get over as long a period as possible. This time round the negotiations were continuing up to the wire, with all manner of big guns being brought out to make the public case for their particular interest. The Chancellor has had to ignore the special pleading and focus on the bigger political objective: to convince voters that you are spending money on the things they care about while reassuring the bond markets that this is not at the expense of fiscal prudence.

Spending Priorities Revealed: Who Gets What?

Characteristically downbeat (she is very much in the Gorden Brown mould of Chancellors), Reeves spoke about choosing “stability” over “chaos”. “investment” over “decline” and “national renewal” over “retreat” and then proceeded to announce a surprisingly generous package of spending.

We already knew a fair amount about where she intended to shine her beneficence. So the promised increased spending for the NHS and to defence were confirmed. At the heart of the package was £113 billion of additional capital spending including £39 billion on housing, £14.2 billion on a new nuclear power plant at Sizewell and a major uplift in spending on transport projects across the country.

But, of course, not everyone was a winner. Some departments like Defra and DCMS have had their day-to-day budgets cut. The Home Office faces a 1.7% cut which should largely be covered by planned cuts to asylum support and the 40% cut to overseas aid contributed to an overall 6.9% reduction to the Foreign Office budget.

Reeves is banking on the huge capital spend boosting growth and doing it relatively quickly – the number of shovel-ready schemes which received funding is notable. She wants voters to see the tangible benefits of the Labour government investment before the next election. It is a pretty bet. She has very little wriggle room and there is much outside of her control.

Storm Clouds Ahead: Global Headwinds and Fiscal Risks

The statement came just a day after the World Bank published its latest global economic prospects report in which it downgraded global GDP outlook by 0.5 percentage points to 2.3 per cent. It attributed the downgrade to the “turmoil” caused by US trade policy. In the UK this turmoil has already increased the cost of government borrowing and if the economy doesn’t grow as quickly as now being predicted in her budget in the Autumn, Reeves will have very little choice than to put up taxes. Not something she will want to do. I am sure there are lots of crossed fingers at Numbers 10 and 11 Downing Street.

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